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Contingencies and Other Accrued Losses | 9 Months Ended
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Feb. 28, 2014
Contingencies and Other Accrued Losses | NOTE 15 — CONTINGENCIES AND OTHER ACCRUED LOSSES We provide, through our wholly owned insurance subsidiaries, certain insurance coverage, primarily product liability coverage, to our other subsidiaries. Excess coverage is provided by third-party insurers. Our reserves provide for these potential losses as well as other uninsured claims. Product liability reserves are established based upon actuarial calculations of potential liability using industry experience, actual historical experience and actuarial assumptions developed for similar types of product liability claims, including development factors and lag times. We believe that we have adequate accruals both for incurred losses and potential losses that (1) have a reasonable possibility of occurring and (2) are material to our results of operations, liquidity, and consolidated financial position. We evaluate our accruals at the end of each quarter, or sometimes more frequently, based on available facts, and may revise our estimates in the future based on any new information becoming available. We also offer warranty programs at several of our industrial businesses and have established a product warranty liability. We review this liability for adequacy on a quarterly basis and adjust it as necessary. The primary factors that could affect this liability may include changes in the historical system performance rate as well as the costs of replacement. Provision for estimated warranty costs is recorded at the time of sale and periodically adjusted, as required, to reflect actual experience. It is probable that we will incur future losses related to warranty claims we have received but that have not been fully investigated and related to claims not yet received. While our warranty liability represents our best estimate at February 28, 2014, we can provide no assurances that we will not experience material claims in the future or that we will not incur significant costs to resolve such claims beyond the amounts accrued or beyond what we may recover from our suppliers. Product warranty expense is recorded within selling, general and administrative expense. The following table includes the changes in our accrued warranty balances:
|  | Three Months Ended |  |  | Nine Months Ended |
|  | February 28, |  |  | February 28, |
|  | 2014 |  |  | 2013 |  |  | 2014 |  |  | 2013 |
(In thousands) |  |  |
Beginning Balance |  | $ | 8,579 |  |  | $ | 15,138 |  |  | $ | 9,330 |  |  | $ | 14,751 |
Deductions (1) |  |  | (4,584 | ) |  |  | (4,908 | ) |  |  | (16,559 | ) |  |  | (12,895 | )
Provision charged to SG&A expense |  |  | 3,761 |  |  |  | 3,407 |  |  |  | 14,985 |  |  |  | 11,781 |
Ending Balance |  | $ | 7,756 |  |  | $ | 13,637 |  |  | $ | 7,756 |  |  | $ | 13,637 |
(1) | Primarily claims paid during the year.
In addition, like other companies participating in similar lines of business, some of our subsidiaries are involved in several proceedings relating to environmental matters. It is our policy to accrue remediation costs when it is probable that such efforts will be required and the related costs can be reasonably estimated. These liabilities are undiscounted and are not material to our financial statements during any of the periods presented. As previously disclosed, we recorded a $65.1 million accrual during the year ended May 31, 2013 associated with settlement discussions with the U.S. Department of Justice (the “DOJ”) and the U.S. General Services Administration (the “GSA”) Office of Inspector General aimed at resolving an existing investigation. Since first receiving a broad request for documents from the GSA in March 2011, we cooperated with that investigation, which involved our compliance with certain pricing terms and conditions of our GSA Multiple Award Schedule contracts under which the roofing division of our Building Solutions Group sold products and services to the federal government. A substantial majority of the transactions as to which potential compliance issues were raised took place during the period from 2002 to 2008. In August 2013, we entered into a final agreement with the DOJ and the GSA Office of Inspector General regarding this matter. During the nine months ended February 28, 2014, we paid the GSA Office of Inspector General $61.9 million and made other payments for miscellaneous legal expenses for approximately $1.1 million. We expect to pay approximately $2.1 million more in legal fees and other related costs arising out of this investigation. The accrual for this contingency represents our assessment of the amount of probable loss that may result from this matter. In assessing our probable loss, we have considered the potentially disputed amounts under the relevant contracts, together with our understanding of policies for resolving such matters. The actual amount of our loss under the terms of any settlement may vary from the amount of the accrual. The accrual for this contingency is classified in other accrued liabilities in our Consolidated Balance Sheets.

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